25 Jan 2015 Licensing of a Gaming Company in Malta
A User’s Guide
Malta has a dynamic economy based on international trade and international business. Amongst its achievements, Malta has built a sound and competitive manufacturing and services base that does not rely only on its favourable geographic position, but also on its multi-skilled, multi-lingual workforce. Malta offers political stability, healthy industrial relations, a pleasant and secure living environment and evident cost advantages together with high productivity levels, a good infrastructure set-up with advanced telecommunications, and a more than adequate air and maritime distribution network.
This has contributed to Malta’s position as a top tier gaming jurisdiction together with the Malta Gaming Authority (the “MGA” or “Authority”)’s focus on the quality of its licensed operators. The MGA’s licensing regime embeds a high level of self-regulation upon the operators thus making sure that the necessary risk management approaches are being adhered to, that the games and the gaming activity are being conducted fairly and that responsible gaming functionalities are in place to protect the vulnerable players.
Classes of Gaming Licenses
The MGA offers the following classes of gaming licenses:
Class 1 License : Operators managing their own risk by offering repetitive games which depend on random number generation e.g. casino type games;
Class 2 License : Operators managing their own risk by offering bets on events based on matchbook e.g. fixed odds betting;
Class 3 License : Operators taking a commission from promoting and abetting games e.g. poker bingo; and
Class 4 License : Operators providing management and hosting facilities on their gaming platform.
The Authority also offers combinations of the above in the form of Class 1 on 4, Class 2 on 4 and Class 3 on 4.
The MGA’s licensing process stands on four (4) pillars:
Pillar 1: Due Diligence Checks
The MGA ensures that the operators are fit and proper to conduct gaming operations. Probability checks are carried out on all Ultimate Beneficial Owners (UBOs), Directors, Chief Executive Officer (CEO) and employees of the gaming company.
Pillar 2: Business Plan and Financial Projections
The MGA assess the business feasibility of the gaming operations from a strategic and financial point of view. The business plan shall reflect the company’s strategy, business definition and objectives, structure, nature of games to be offered, technologies to be used, financial plan, marketing initiatives to be undertaken and three-year financial forecasts.
Pillar 3: System Documentation Review
Operators need to implement technical measures which are fundamental in sustaining the gaming operations. The Authority shall carry out checks on, amongst others, the statutory documentation, Business Entity Form, fund management, company policies and procedures, agreements and contracts, game operations and gaming certifications, KYC and fraud management procedures, AML procedures, terms and conditions, technical set-up, disaster recovery and business continuity, website and online text, game fairness etc.
Pillar 4: System Audit
The System Audit is carried out on the testing environment prior to the operator going live. The Authority engages independent certified auditors to perform the Audit.
It is necessary that the gaming and control systems are in accordance to the Remote Gaming Regulations.
Checks are carried out on gaming and control system and set-up, system and player account security, player activity information, gaming and financial history, player registration, website content, AML procedures, fraudulent activity deduction, player self-protections mechanisms, implementation of reality checks, full screen games, aborted and miscarried games and reporting procedures.
The Key Official
Every gaming company licensed in Malta must appoint at least one Key Official who shall also be a director of the company and is resident in Malta. The person appointed as a Key Official shall be subject to the MGA’s approval.
The Key Official is often referred to as the guardian of a remote gaming license as he / she is responsible to see that the operation is compliant with the Remote Gaming Regulations. The person occupying the role of the Key Official is generally considered as the main point of contact between the MGA and the licensee and must therefore necessarily be readily available when required by the MGA.
The Key Official oversees the licensed gaming operation, carrying due representation and hence being able to take decisions and respond to the obligations stipulated at law. It also creates a synergy of responsibilities for the obligations stipulated by law and mechanisms to resolve issues expeditiously, if and when they arise, with a high measure of accountability.
All the operations of the licensee should run through the Key Official and any required reports should be formulated and submitted to the Authority under his guidance. Furthermore, any resulting breach of obligations and the lack of scrutiny, could be tantamount to a breach of the license and hence constitutes one of the grounds for which a license can be withdrawn by the Authority with criminal and / or administrative penalties.
The Key Official’s term of office is indefinite and subsists throughout the license term and beyond unless suspended or cancelled by the MGA. Furthermore, a Key Official license cannot be surrendered unless prior written consent is obtained from the MGA.
Class 1 : EUR 4,660 for the first 6 months and EUR 7,000 per month for the entire duration of the license.
Class 1 on 4 : EUR 1,200 per month for the entire duration of the license.
Class 2 and Class 2 on 4 : 0.5% of the gross amount of bets accepted in remote betting operations.
Class 3 and Class 3 on 4 : 5% of real income calculated on the commission after deducting payment gateway fees, bonus and intermediary fees.
Class 4 : Nil for the first 6 months of operations, EUR 2,330 per month for the subsequent 6 months and EUR 4,660 per month thereafter for the entire duration of the license. Class 4 licensees hosting and managing an operator which is not in possession of the relevant Class 1,2 or 3 license in terms of the regulations, however hosting an EEA licensed Business to Consumer operator shall be charged EUR 1,165 per month per operator paid by the Class 4 license.
A Gaming Tax capping of EUR 466,000 per annum per remote gaming license applies.
The Highly Qualified Persons Scheme
The Highly Qualified Persons Rules were first made available to the remote gaming industry in 2011. Through them a number of employees of remote gaming businesses licensed by the MGA may benefit from a reduced rate of 15% income tax on their personal income, following fulfilment of a number of pre-requisites set by the law.
The scheme is available to a variety of ‘eligible posts’ – from managerial posts such as CEOs and CFOs to specialist posts such as Traders and Odds Computer Specialists. It is important that an applicant is able to show evidence that he / she fulfills the job description of one of the posts named in the law. The list of posts cannot be extended to include employees who hold a managerial or specialist position which is not covered by law.
The minimum salary one has to receive to qualify under the scheme is a basic gross salary of EUR 80,100. The Authority shall approve the individual as a high net worth individual and to start benefiting from the tax benefit.
lecocqassociate provides a full range of financial regulatory, corporate and commercial advice in relation to the structuring and incorporation of entities.
This newsletter is for information purposes only. It does not constitute professional advice or an opinion. Please contact Mr. Dominique Lecocq on moc.e1524270025taico1524270025ssaqc1524270025ocel@1524270025lrd1524270025 for any questions.